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The Price and Costs of Capacity Decisions

Jan 30, 2014

The recent frozen traffic jam that shut down Atlanta and stranded hundreds of people for hours was frustrating to those caught in it. The complaints of “how could they let that happen!” rang loudly in social media posts by people stuck in the midst of the nightmare. Those cries sounded amazingly similar to those of folks that lose power during a summer heatwave.

Do the citizens of Greater Atlanta want to pay for snow removal equipment and manpower for the 2-3 years they are not needed so that they are available for the few hours they could be helpful? I doubt it. Just as people who complain about utility prices don’t want to pay for excess capacity the 360 days per year that it is not needed to keep them cool.

Some flights are over booked; others fly with empty seats. Some hotels are overbooked; others have unused rooms. If a storm threatens, grocery stores run out of milk and bread; more often, a percentage of perishable products go unsold as they reach the “best by” date.

We are logical people. We want what we want when we want it at a price we want to pay. Unfortunately, few forms of capacity are inexpensively variable. So we get stranded, we get hot and food spoils, we fear starvation from a storm. Our logic all too often fails to see the inescapable logic of this cycle.

I feel badly for children and the elderly stranded in Atlanta, as their health and safety were at risk. But for the rest of you, consider it an adventure that saved you money the rest of the year and get on with your lives.